Major Lender Agrees To Pay Up To $484m

Thousands of Florida homeowners will get relief from unfair mortgage deals under a settlement announced Friday by a major lender and attorneys general from 20 states.

Under the agreement, one of the largest ever in a consumer protection case, lender Household International Inc. of Prospect Heights, Ill., will cough up as much as $484 million to end accusations that it charged excessive fees and placed onerous terms on loans for mortgages and debt consolidation.

Of that amount, Florida Attorney General Bob Butterworth said affected Household customers in Florida -- an estimated 14,700 of them -- would share $22.7 million. Individuals who took out mortgage loans with Household since 1999 may be eligible for refunds. State officials have not determined how the money will be divvied up. They said the volume of business Household did in the Sunshine State determined Florida's share.

Butterworth also pointed out that Household, which did not admit to any wrongdoing, is changing its lending policies.

For example, it is dropping prepayment penalties that charged customers thousands of dollars if they refinanced their mortgages within five years or after closing the loan. The company is also freezing foreclosure proceedings against people who have not been able to keep pace with loan payments, Butterworth said.

Household officials said they were pleased to have reached an agreement. Michael Eden, the Eastern regional general manager, said the company admits it has not always lived up to its own standards and is taking measures to change.

"We made some mistakes in the past, but we're making sure we have the proper checks and balances in place," Eden said.

Those safeguards include an internal audit of every branch each year, he added.

Butterworth said the Household case should set a precedent for crackdowns on other similar predatory, subprime lending programs that generally target minorities and elderly people.

Instead of giving them a better interest rate, as many of the ads and salesman promise, the loans tack on fees for insurance and other charges that jack up the costs of the loan.

"Unfortunately, this is not an isolated case," he said, insisting that all the money received from Household will be doled out to victims.

"All of it -- 100 percent -- will go to them. Not one dime will go to anything else than the consumer."

One of those hoping to get relief is Elizabeth Guzman, a homeowner in Hialeah.

After buying a home, Guzman was approached by a Household loan officer who told her she could qualify for a $10,000 loan to consolidate her debts. The single mother thought she would get the loan at 8.25 percent, but soon realized she had an interest rate closer to 17 percent. And, after being told she would not have closing fees, Guzman said she was charged between $600 and $800 to close the loan.

She said she has had to borrow against her retirement savings to make loan payments, but is glad she only borrowed $10,000.

"I would have lost my house if I took out more money," she said. "It's been very rough. Easy money is not easy at all."

Watchdog activists who have been pushing for tougher laws against abusive loan practices applauded the agreement between Household and the attorneys general.

"This is a good start," said ACORN President Maude Hurd in a statement. "But it is by no means an end. We are glad that attorneys general -- and in some cases bank regulators -- in many states heard the outcry about Household's loans, and that Household has begun to recognize the need to make amends."

Florida officials said consumers who feel they may be victims of predatory lending should call the office of attorney general at 954-712-4600.

Antonio Fins can be reached at afins@sun-sentinel.com or 954-356-4669. Purva Patel can be reached at ppatel@sun-sentinel.com or 954-356-4667.